Fallow focuses the debate on facts

It’s interesting, in all the rhetoric about the Emissions Trading Scheme, to see the Herald’s business correspondent Brian Fallow applying more than a modicum of balance to the debate. His article last week on the greening of assigned amount units (AAUs) was notable as one of the few pieces that had been written by someone who had thought about the issue first before commenting.

The idea that a behind-closed-doors deal between the Government and the Greens has deprived emitters of a bountiful supply of cheap carbon assumes, implausibly, that eastern European governments with “hot air” to sell will say to a New Zealand corporate emitter: “We can see the sort of prices you would have to pay on the deep and transparent CDM market. But don’t worry, we will sell you a substitute form of carbon at a fraction of that price because, what the hell, we’ve got plenty and we used to be communists and haven’t quite figured out how markets work yet.”

Today’s commentary looks at the actual costs to consumers and, importantly, polluters that will arise from the Emissions Trading Scheme. I don’t agree with all his analysis but it’s a breath of fresh air after the ill-informed scaremongering coming from some of the more politicised corners of the business sector.

There are costs associated with the ETS. Indeed that is the whole point; to transfer the economic costs of emissions as price signal to change our behaviour. But it is helpful to put those costs in perspective:

Petrol prices, officials estimate, would rise 6c a litre (at $25 carbon) which at today’s prices would be a 3 per cent increase.

That is dwarfed, however, by the impact of higher world oil prices over recent years. Prices at the pump have dropped 18c a litre from their mid-July peak, but are still 80c a litre, or 67 per cent, higher than they were four years ago.

There are also opportunities that arise from the Emissions Trading Scheme too. Businesses that respond wisely and manage their emissions with forethought will be rewarded by becoming markedly more competitive. Fallow notes that the costs don’t actually spring from the ETS. We’ve already agreed to pay the cost. The ETS just decides how those costs are divvied up between polluters and other citizens:

By ratifying the Kyoto Protocol in 2002, New Zealand took responsibility for its share of global greenhouse gas emissions. What the ETS does is devolve that responsibility from taxpayers to the firms and individuals whose decisions ultimately determine how large those emissions are.

“Expect another round of heated lobbying as the big emitters, championed by Business New Zealand, the Greenhouse Policy Coalition and the Major Electricity Users Group, push for the easiest deal they can get. The original bill gave them plenty of scope for lobbying because the government could set allocations and other rules without reference to parliament.

But thankfully, the Greens, as a condition for their support, have won some major improvements in the process. The allocations will now be scrutinised by select committee and parliament; trade-exposed businesses will get additional allowances only in proportion to their trade-exposed production; and the idea of setting up an independent or semi-independent body to make allocations will be investigated.”